A ROBUST METHODOLOGY FOR RAMSEY PRICING WITH AN APPLICATION TO UK POSTAL SERVICES

The policy relevance of Ramsey pricing calculations naturally turns on their robustness. This paper sets out a methodology for a ''minimal i nformation'' approach in examining the sensitivity of Ramsey prices to changes in demand and cost parameters. The ''minimal information'' re quired for the approach to be operational is (i) a set of estimated de mand functions for the products involved and (ii) some idea of the ''b all-park'' for marginal costs for these products. A case study of the UK letters business is used to illustrate the approach.